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Gibraltar profits drop 31 percent Housing, auto slump hurts

Gibraltar Industries said second-quarter operating profits fell 31 percent, as lower profit margins in processed metals and building products for residential housing overcame gains from acquisitions.

The Hamburg-based building materials company reported income from continuing operations, before charges, of $13.6 million, or 45 cents per share, down from $19.8 million, or 66 cents per share, a year ago. That was in the middle of the guidance the company previously provided to Wall Street, and met analysts' expectations.

Operating results didn't include $2.7 million in one-time charges, consisting of $1.5 million for legal, accounting and other costs from an unidentified merger that wasn't completed, and $1.2 million for the consolidation of Gibraltar's strip-steel facilities.

Factoring those in, net income from continuing operations fell 39 percent to $11.9 million, or 40 cents per share.

The company warned that, barring a "significant change" in the business climate, Gibraltar expects third-quarter profits from continuing operations to fall between 40 cents and 45 cents per share, versus 61 cents in the same period last year.

Shares tumbled 8.8 percent Thursday to a 52-week-low of $19.03 -- the lowest since October 2005. At their height a year ago, shares were worth $27.63.

"These results are well below what we believe the business is capable of generating," Chairman and CEO Brian J. Lipke said on a call with analysts.

Sales from continuing operations rose 5 percent to $369.8 million, driven largely by acquisitions of Montreal-based Dramex Corp. on March 12 and a trio of West Coast companies on April 11. In contrast, sales from businesses that existed a year ago fell by about 7 percent because of lower activity in the home and automotive markets.

"The residential building market continues to work its way through a severe slowdown and the automotive market is sluggish," Lipke said.

Within its businesses, building products sales rose 9 percent to $260.2 million, with acquisitions and commercial and industrial sales offsetting sluggish sales in the new home market. Operating profits fell 23 percent to $31.2 million.

Gibraltar's processed metals business' operating profits slid 55 percent to $3.6 million, as sales fell 3 percent to $109.6 million.

Even so, Lipke said 2007 should still be the second-best year in the company's history. He touted a dramatic improvement from the first quarter, with income from continuing operations before charges more than doubling from the first quarter. However, the second and third quarters are normally stronger anyway.

He also cited recent acquisitions and its overall expansion into the commercial building and industrial markets, as well as internationally, as contributing to the improved performance and future potential.

"Our goal is to build a company capable of performing well in tough times and one that excels in good times," he said. "We made steady progress in a very difficult operating environment and we think the company is well positioned to achieve new performance records once our markets return to more normal activity levels."

Still, Lipke is trying to improve the company's performance by consolidating and streamlining operations to cut costs. Locally, the company combined two Buffalo-area steel processing plants, closing its location on Military Road to boost that unit's operating margin.

Elsewhere, it also consolidated three Dramex facilities into nearby plants acquired from Alabama Metal Industries Corp., and closed a ventilation products plant while moving its work to another location.

The company now operates 47 manufacturing plants and 27 distribution facilities, six fewer than it had at the start of the year. Lipke said officials have "identified" other places to consolidate, including two that will be completed by year-end at minimal costs.

And the company is still focusing on lean manufacturing, reviewing its business lines, and eliminating overlapping administrative and back-office functions.

During the quarter, Gibraltar repaid about $30 million of its revolving debt, and executives plan to repay more in the third quarter.


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